Takeda, Nintendo among Japanese companies quietly celebrating the weak yen

By Rocky Swift

TOKYO (Reuters) – The Japanese yen is at its weakest in decades, driving high costs of imported food and fuel for households and businesses, but also proving an unexpected tailwind for multinationals like pharmaceutical giant Takeda.

As the Bank of Japan reiterated its commitment to easy monetary policy on Friday and reaffirmed its position as a dove in its own right in a global environment of rising inflation, the yen fell back to the lows of 135.60 per dollar hit this week. It’s down 14% this year against the US dollar.

Households have complained about the impact on their wallets. Almost half of the companies that responded to a survey by Tokyo Shoko Research this week said the weaker yen would have a negative impact on their business. Only 3% said it would be a good thing.

However, many companies’ forecasts for the current fiscal year are based on assumptions that the currency will be 15-20 yen stronger against the US dollar than current levels. That means those with lots of overseas business and less dollar debt should get a sales boost simply by hitting their existing goals.

A weaker yen is helping Takeda Pharmaceutical Co, Japan’s largest drugmaker, as 80% of its sales are done overseas, CFO Costa Saroukos said. Takeda had made its predictions based on a yen of 119 to the dollar. “Assuming exchange rates remain where they were in April and May, with one dollar around 130 yen, we will have high-single-digit percentage upside potential compared to our sales and earnings forecasts,” Saroukos said this week .

Toyota Motor Corp, Panasonic Corp and Nintendo Co were also conservative, expecting the yen to trade at 115 against the dollar by March 2023. Sony Group Corp has one of the weakest yen forecasts at 123 per dollar – but that’s still a long way off current levels not seen since 1998.

Nintendo, a Kyoto-based video games maker, released its full-year earnings guidance last month, assuming the dollar-yen rate would be 115 by March 2023, when the fiscal year ended. President Shuntaro Furakawa told investors at the time that a one-yen shift from that rate alone would result in a 6.3 billion yen ($47 million) increase in US revenue if sales remained flat.

Fujio Mitarai, president of camera maker Canon, said the currency’s depreciation could be “a very big plus” for the company. He made the comment after Canon released forecasts based on an expected rate of 120 yen to the dollar.

But Mitarai warned that this would depend on avoiding extreme increases in component prices or production slowdowns. He cited downside risks that were developing “violently and unpredictably.”

Some Japanese companies that could benefit from the exchange rate see complications limiting upside potential.

Koji Shibata, CEO of airline ANA Holdings Inc, said on April 28 that the weak yen is “a great opportunity for visitors to Japan” but called the current restrictions on foreign arrivals a “waste”.

DOUBLE-EDGED SWORD

Nintendo makes most of its profits from high-margin software and therefore benefits from overseas sales made in relatively stronger currencies.

But other Japanese companies that rely on their own production are also having to contend with lower purchasing power for components and materials due to the weaker yen.

And after years of strengthening overseas production and supply chains, many manufacturers now see fewer benefits from a weaker currency than they did years ago.

Sushiro, who runs an assembly-line sushi restaurant, said last month that his iconic 100-yen plates would be phased out in October after nearly 40 years, a victim of the weak yen and rising production costs. Asahi Group Holdings announced in April that it would raise the price of its market-leading canned beer, Super Dry, for the first time in 14 years. Competitors Kirin Holdings Co, Suntory Beverage & Food Ltd and Sapporo Holdings Inc have followed suit by announcing price increases. Researcher Teikoku Databank said this month that the prices of more than 10,000 foods in Japan would rise in 2022. “We import a lot, so the impact of the weakening yen is significant,” Toru Sakamoto, chief executive of seafood producer Maruha Nichiro Corp, said last month. “The costs are increasing due to container shortages and rising fuel prices. We do everything we can to reduce production costs, but at this point we have no choice but to pass this on through our prices.”

Tadashi Yanai, Japan’s richest person and CEO of Uniqlo’s parent company, Fast Retailing Co, believes there is “absolutely no value” in a weaker yen.

“Japan is in the business of importing raw materials from around the world, processing them, adding value and selling them,” he said in April. “In this context, there is no advantage if the value of a country’s currency weakens.”

Takeshi Hashimoto, CEO of transportation giant Mitsui OSK Lines, said in April his company’s profits had risen because of the weak yen.

“However, I don’t think that’s our true strength, and I don’t think we should be happy or sad that profits are going up or down because of that.”

(Edit by Vidya Ranganathan and Bradley Perrett)

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